Lectures: 2x per week, interactive, won’t cover everything. Self-study required (see web-book etc.)

Readings and coverage: see Web-book (aka handout). The HANDOUT is king.

• Roughly 8 problem sets– about 1/week on each chunk of material; (unassessed); questions come from exams or build exam skills

• Support classes/tutorials about each fortnight, covering key material from recent problem sets

• Extensive additional material (formative assesments, mock exams, tutorial videos, forums etc) to help you prepare for asessment, and for your interest

\(\leftarrow\) Five competencies…

Five essential competencies of an Economist (Algood and Bayer, 2017)

1. Apply the scientific process to economic phenomena

2. Analyse and evaluate behaviors and outcomes using economic concepts and models

3. Use quantitative approaches in Economics

4. Think critically about economic methods and their applications

5. Communicate economic ideas in diverse collaborations

Skills demanded by employers

1. Economic basics (weeks 1-2)

• Economic models, maths tools, introduction (NS ch. 1)

• Utility, preferences, indifference curves, budget constraints (NS 2)

we build it up and then burn it down…

2. Build the model, put it together, examine it (weeks 3-5)

The Demand side:

Demand curves: Individual and market demand (NS ch. 3)

The supply side:

(Abbreviated: Production, costs, returns to scale, choice of inputs)

Profit maximisation and supply, perfect competition in a single market

Supply curves, entry/exit, Consumer and Producer Surplus, general equilibrium and welfare (brief)

3. How the market can go wrong (and how to maybe fix it) (weeks 6-7)

• Market failures – Public goods

• Monopolies; price discrimination as an imperfect remedy

4. Extensions to the model and applications (weeks 8-11)

• Uncertainty (basic concepts, EU, risk aversion, investment choices)

• Game theory; experimental evidence

• ‘Behavioural’: Limits to cognition, willpower, self-interest; applications and evidence

Examples of exam material:

• Practice problems in lectures and at the end

• Problem sets, mock and sample question on the VLE

• Previous exams (esp since 2015-16)

  • With suggested answers, explanations, and ‘common mistakes’

Haha

Why are you here (in this lecture theatre)?

To learn.

• Because you think it’s interesting

  • to ponder big questions about individuals, markets, society

  • to understand how people have tried to bring order to difficult questions

  • because you want to contribute something to the world

• Because this stuff is actually useful in the real world

  • For your professional and/or academic career

  • For your life

But anything I say you can find online, or in a book, so why are you here?

To interact

Not to hear what the lecturer has to say, but for the lecturer to respond to what you say.

The ‘HANDOUT’ file/web-book

For now, available to you exclusively on the VLE

Contains all the lecture slide material and more, html links, etc.

• As we progress…
  • Read the introduction: Key information to understand how it works (abbreviations etc)
  • Leave comments/question directly on file via hypothes.is; it will be a conversation!

Possible in-lecture interaction

• Responseware, questions, polls and ‘chat’; ‘Kahoot’

• In-lecture experiments and games

• Ask me questions, especially at beginning and end

  • Raise a white handkerchief if you are lost

• Draw-along and solve-along

Heavies

Economists do not know everything (but we have thought through many arguments)}

Most non-economists do not fully understand these arguments, and they make mistakes, and they worry.

• But sometimes ignorance is bliss.

• … more deep truths to follow, enough for now

• \(\rightarrow\) ‘All you can eat’ \(\rightarrow\) Spotify, Netflix, Kindle Unlimited
  
  

\(\rightarrow\) ??

\(\rightarrow\) ??

\(\rightarrow\) Uber, AirBnb, ‘bilateral reputation systems’

Shyness and fear of ‘losing face’

• \(\rightarrow\) Tinder, Squad, etc.

Ties in to my research …

What is Economics?

‘Economics is the study of the allocation of scarce resources among alternative uses.’

‘Economics is the study of mankind in the ordinary business of life.’ Alfred Marshall

What is Microeconomics?

The study of the (economic) choices individuals and firms make and how these choices create markets.

• Largely, using theoretical and mathematical ‘models’ that depend on strong assumptions.

What do models give us?

There are different views of this

Assumptions \(\rightarrow\) Results

and sometimes \(\rightarrow\) testable predictions (if the assumptions hold)

So why learn these models?

• A starting point

• (Sometimes) make testable concrete predictions

• Building insight, clear arguments, a way of thinking

• Discussion is framed around them; seen as a ‘baseline’

• Understand to be able to critique/extend

The PPF: a ‘model’ and a way of seeing things

• Principle 1: Scarce Resources

• Principle 2: Scarcity involves opportunity cost.
  

Above PPF: opportunity cost of more clothing is less food.

Principle 3: Opportunity costs are (often) increasing

• ‘Law’ of diminishing marginal returns

Studies of honeybees have found that they generally do not gather all of the nectar in a particular flower before moving on.

Why not?

• Consider the same for the UK/Exeter; give your best estimate

• How does the analysis differ from the one your uncle would do?

I want you to be able to answer…

Marshall’s Model of Supply and Demand:

• Why ‘demand curves slope down’?

• Why ‘Just like neither scis cuts alone, neither the supply nor the demand curve determines the equilibrium price and quantity in isolation’?

More challenging questions: see handout

To respect yourself in the morning, know

• Which factors cause the supply and demand curves to shift?

• What causes ‘movements along’ the supply or demand curve?

Discussion question 6 from NS

Gasoline sells for $4.00 per gallon this year, and it sold for $3.00 per gallon last year. But consumers bought more gasoline this year than they did last year. This is clear proof that the economic theory that people buy less when the price rises is incorrect.

Do you agree? Explain.

2018 Midterm question (slightly changed)

2018 Midterm question - again, slightly adjusted

Next lecture:

• Math tools (some of these, will cover others ‘as we go’)

• Empirical analysis

• Introduction to Utility and choice (Time-permitting)